One drawback to multi-asset funds is the typically higher total expense ratios (TERs) tag attached to these funds, when compared to single asset funds. A number of multi-asset funds are funds of funds which can often have TERs of over 2 per cent.
Justin Modray of candidmoney.com comments: "They are worth the money, provided the manager delivers consistent performance via a diverse portfolio. Performance has been mixed, but the better diversified funds have weathered the global downturn reasonably well, however not all multi-asset funds are sufficiently diverse."
But Martin Bamford of IFA Informed Choice says he is yet to see any evidence that these funds are worth the money in terms of performance, but adds that it is worth it for investors who require the fund to achieve a diverse portfolio or don't want to asset allocate themselves.
Although one of the best-performing funds in the cautious managed sector is a single manager multi-asset fund, Ruffer Total Return Fund, Mr Bamford says: "A fund of funds can also make sense as different fund groups have different strengths. If the multi-asset fund is not a fund of funds the manager will need to be competent across a range of assets."
A fund of funds also diversifies risk by investing with different managers, whereas one manager is a more focused bet.
A cheaper option for investors seeking the diversification benefits of multi-asset funds may be a fund of exchange-traded funds (ETFs), such as recently launched T.Bailey Growth Fund Lite, which has a TER capped at 0.99 per cent. The fund's starting asset allocation is: UK 25 per cent, US 25 per cent, emerging markets 17.5 per cent, Europe (ex UK) 15 per cent, Japan 7.5 per cent and Pacific Basin (ex Japan) 10 per cent. The fund of ETFs mirrors one of T Bailey's active funds, the 10-year old T Bailey Growth Fund.
Mr Bamford expects more such funds to be launched, while private wealth managers such as Evercore Pan Asset already offer construct ETF funds for their clients. Recently launched wealth manager Quartet Capital, meanwhile, has indicated that substantial portions of its client portfolios will be accounted for by ETFs.
